Spotlight on poor value car finance
Some car dealers may be falling foul of finance rules.
A Commerce Commission investigation into finance offered by car dealers found that some borrowers were left in the dark over their obligations.
The commission looked at loans, alongside add-on products such as mechanical breakdown insurance and guaranteed car protection insurance.
The investigation was spurred by the regular complaints the commission received about car dealers.
One aspect was some dealers falling short when it came to helping customers make an informed decision about borrowing.
The commission found customers didn’t always know what car loan products they were buying.
Thirteen out of 62 customers said they didn’t understand the product they had bought. While eight were not aware they had purchased an add-on, or only discovered it once the contract was signed.
Fourteen thought the add-on was compulsory and a condition of getting car finance.
If you’re borrowing money, the lender must make sure you understand your rights and obligations under the Credit Contracts and Consumer Finance Act (CCCF). The Fair Trading Act also prohibits dealers and lenders from making false or misleading claims.
While many car brands have their own finance arms, others offer loans through finance companies. If a car yard uses a finance company, the company needs to ensure the car dealer is meeting its CCCF obligations.
However, the commission’s report pointed to a potential conflict of interest where dealers who are responsible for arranging finance may also be earning a commission on sales from lenders.
Similar studies in the United Kingdom and Australia have found that add-on finance products for motor vehicles provided poor value for customers.
The commission plans to meet with lenders and insurers and, when necessary, will tell them how to improve borrowing processes.
Have you been sold car finance or an “add-on” that doesn’t add-up? Get in touch with [email protected].